Thank you in advance for your responses. I hope that this is the right location for this question, as I feel that it deserves consideration. Let me begin by writing that, as a mortgage professional, I frequently work with clients who have been brutally refinanced in the past and currently owe more than the value of their home. This is a sad time for these folks, and neither refinancing nor selling will provide them with the capital required to break even.

My question: Home owners often solicit realtors for CMAs when they need a professional opinion of their home's value. They then take this to mortgage companies and attempt to refinance besed on the value of the CMA. Just last week I reviewed one CMA and found its value to be roughly $70,000 higher than what I knew the property would appraise at (and this was independently confirmed, unfortunately). The comps were mainly of new construction colonials, and the gentleman's home was a mid-70's split level.

In less than 60 days this nice man will lose his home. He is a disabled vet, and the home has been modified to fit his needs. The home is on the market, but it will not sell in a declining market at the list price, nor will it sell at a price that, after commissions, will allow him to break even.

When CMAs are provided to potential sellers, what precautions are taken to protect the sellers Are there any ethical guidelines? Is misleading a client in order to win a listing worth costing that client his/her home?

If this were an isolated incident I would not ask the question. I find that this is becoming common practice, and it is hurtful. This is my first post, but this forum has been very valuable to me. Again, I thank you for your time and consideration.

These are from the Realtor® COE, I'm including any Standards of Practice, if I missed any, someone let me know, that may even be remotely relevant to CMAs or valuations:

Standard of Practice 1-3
REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.

Standard of Practice 1-14
Fees for preparing appraisals or other valuations shall not be contingent upon the amount of the appraisal or valuation.
(Adopted 1/02)

Article 5
REALTORS® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.

Article 11
The services which REALTORS® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate.

REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/95)

• Standard of Practice 11-1
When REALTORS® prepare opinions of real property value or price, other than in pursuit of a listing or to assist a potential purchaser in formulating a purchase offer, such opinions shall include the following:
1) identification of the subject property
2) date prepared
3) defined value or price
4) limiting conditions, including statements of purpose(s) and intended user(s)
5) any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants
6) basis for the opinion, including applicable market data
7) if the opinion is not an appraisal, a statement to that effect (Amended 1/01)

• Standard of Practice 11-2
The obligations of the Code of Ethics in respect of real estate disciplines other than appraisal shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance, and, where the REALTOR® is an agent or subagent, the obligations of a fiduciary. (Adopted 1/95)

• Standard of Practice 11-3
When REALTORS® provide consultive services to clients which involve advice or counsel for a fee (not a commission), such advice shall be rendered in an objective manner and the fee shall not be contingent on the substance of the advice or counsel given. If brokerage or transaction services are to be provided in addition to consultive services, a separate compensation may be paid with prior agreement between the client and REALTOR®. (Adopted 1/96)

Sorry for two posts, but I didn't want my response to be too long.

When dealing with re-fi's I'm a firm beliver that CMAs should not be used. Agents that do CMAs are normally doing them in hopes of securing a listing, not for lending purposes.

Most CMA programs are designed to show off the agent/broker, as well as the subject home itself. They don't go into detail about the things that really determin value. For example, whether it's a buyers' or sellers' market, the avg. DOM for active listings area, not just solds, employment conditions, tax issues, education issues, items that may not just attract someone to any given area, but detract from it as well, what types of listings are driving the market, (new construction, relos, REOs, whatever) if values are stable, declining, increasing, and by how much annually.

That being said, the banks that I work with in the BPO/REO niche, as far as I know, for re-fi's, have been ordering between 2 and 5 BPOs, as well as an appraisal, usually, per property. And I'm more than a tad shocked that any lending institution would rely on a CMA rather than a few BPOs & an appraisal to lend cash.

This topic is probably better suited fopr the Ethics forum and I am moving it there.

I agree with KT - in my area CMAs are never used for financing purposes - and appraisal is required.

A CMA is produced for marketing and not as a bona-fide determnation of value. Homeowners often will keep obtaining CMAs from a multitide of REALTORS - encouraging them to find the highest price possible - until they finally get one that is high enough for their purposes. That is the one they give to you

I would not use new construction and re-sales as comps., I'd also try to stick to identical house styles and re-sales.

But there's so many more things that (should) go into a property valuation than style & age. Obviously those two things are important, but sometimes, not the most important.

How old is the CMA?It might have been correct when it was doen for the homeowner 3 moths ago,markets shift.

I always tell sellers regular appraisals mean nothing as the appraiser wants to get paid so hits the number the seller wants it to come in at.Refi appraisals are also different as lenders go up to 125 percent of the homes value depending on the homeowners credit and the condition fo the property.

Cma is just an opinion of value so no appraisal there.

The VA will bend over backwards to help the vet.I know a seller in a simial situation where the va had a new plan where the seller did not have to make a pyment for 6 months and they got his interest rate reduced.He needs to call the va office.If he can't stay in the home,he needs to do a deed in luie of foreclosure or he can do a short sale(for the va it is called a va compromise sale,he would need to check to see if he meets the va requirements for th eprogram)This is if he has a va loan,if he does not he can still do a deed in liue or a short sale.

Thank you for your responses. I appreciate all of your feedback.

This to me is not a CMA problem but a lender problem. How did your client obtain financing on the property so far over the value? Lenders do not use a CMA to establish loan value but use an apraiser to determine the value. If you suspect predatory lending in these cases it is your duty to report it.

That's easy. They give appraisers a copy of the PA (or refi info) so the appraiser knows where the appraisal has to come out at. It happens everyday. I had a listing where a guy owed well over $100K more than the house was worth (and this was in a rural area where the average price of a home is only around $80K). Appraisers and lenders are working together to make loans go through and that includes hugely inflated appraisals.